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The Fair Work Commission has rejected a restaurant’s proposed single enterprise agreement, despite the employer issuing several undertakings in its attempt to have the agreement approved.

The FWC held that the undertakings were not enough for the agreement to pass the Better Off Overall Test (BOOT), and had substantially changed the essential character of the original agreement that employees had voted on.

Facts of case

A Western Australian restaurant lodged a proposed enterprise agreement to cover its employees. The agreement contained many provisions that traded off provisions of the relevant reward in return for pay rates that were above the award minima. However, the FWC concluded that these pay rates were not high enough to compensate employees for their loss of other benefits and protections, so it sent the agreement back, stating that it would not pass the BOOT in its current form.

The rejection notice listed one item in the agreement that appeared to be illegal. The items in the award that were excluded from the agreement included some shift, weekend and public holiday penalties; annual leave loadings; various allowances; and entitlement to notice of termination if abandonment of employment occurred.

In addition:

minimum hours of employment per shift were reduced from six to three for full-time employees and from three to two for part-timers

minimum break between shifts was reduced

overtime loadings were reduced

there were more stringent provisions relating to meal breaks

other miscellaneous entitlements were reduced or restricted

Because the FWC believed employees would be worse off overall, it requested that the employer provide signed undertakings to it plus information on both the views of the bargaining representatives and how the agreement contents were explained to employees. The latter was to help determine whether they had genuinely agreed.

The employer responded with several undertakings, plus further undertakings and some revised agreement clauses when the FWC issued a second request. However, the FWC still believed that employees would be worse off under the proposed agreement and sent the employer a comparison table to illustrate the differences. The latter indicated that the employer would have to further increase wages to compensate for the loss of other benefits.

The FWC also believed that the proposed new rostering system was detrimental to the employees and called a hearing to try to resolve the remaining issues.

Employer’s case

The employer claimed that its undertakings were not intended to restrict or limit the number of hours employees could be rostered to work on weekends, and they would have the impact of increasing wages.

It claimed that the contents of the agreement were explained to all employees at a staff meeting. It claimed that when the rostering provisions were explained in detail, it was emphasised that employees would not be forced to work every weekend and there were no actual changes to the existing system of rostering employees.

Under that system, 80 per cent of employees’ working hours were on weekdays, they were not required to work on both days of any weekend, and they were rostered off every second weekend. It claimed that one of the undertakings was intended to protect any employees whose weekend hours happened to exceed 30 per cent.

Another undertaking submitted to the hearing set out higher pay rates than those in the original agreement.

Further undertakings covered the following:

revised provisions for abandonment of employment

revised hours and rostering provisions

minimum shift lengths restored to award levels, but the parties could agree in writing to a reduction if there was a downturn in business

minimum breaks between shifts restored to 10 hours

changes to the provisions relating to overtime rates, meal breaks and directives to employees to take annual leave

In issue

The FWC had to decide whether the undertakings amounted to “substantial” changes to the proposed agreement. If they were found to be substantial, they would change the essential character of the agreement enough to make it something that employees had not voted in favour of.

The latter finding would require the FWC to reject the changes, as would a finding that the changes were still not enough for the agreement to pass the BOOT.

Decision

The FWC refused to accept the undertaking relating to rosters, finding it would still leave some employees worse off, particularly those who performed most of their shifts at weekends. It appeared the 30 per cent limit was not explained to employees before they voted. Therefore this undertaking would have imposed conditions on employees that they had not approved, and would make substantial changes to the agreement. It rejected the employer’s argument that the undertaking would provide protection to employees whose weekend work exceeded 30 per cent because it also acted as a disincentive to employ them beyond 30 per cent in the first place.

The other undertakings simply increased the amounts of the benefits available to employees and therefore did not substantially alter the agreement. But because one undertaking did the latter, the FWC still rejected the agreement.

The bottom line: If the FWC seeks undertakings from an employer in relation to a proposed enterprise agreement, because it does not pass the BOOT in its current form, the content of the undertakings must not substantially change the essential character of the agreement. If it does, the FWC may say that employees have not approved the provisions.

Employers are recommended to apply their own BOOT to a proposed agreement before submitting it for registration. This process could involve preparing a comparative table of the value of all provisions versus those in the relevant award. The outcome must be that no employee ends up worse off overall.